In the whole game, you are inside the barrier. But that's not a bad thing at all. Penal Colony's design is one of the best I have ever seen in any game. Detailed and atmospheric as it gets. Although I played the game around 1/5 years ago, but I still remember most of its parts pretty well. That's how memorable it was.

The area inside the colony is quite large. Not as large as say Morrowind, or even later Gothic games, but there is a lot to explore, and the game world feels both diverse and coherent (something that can't be said about Gothic 3, which feels diverse, but not at all coherent).